Streamline Financial Close Management

Elizabeth Milne

Part 5 of the Finance Transformation” series that explores how finance can take the lead in driving their companies towards an intelligent enterprise

With increasing transactional volumes and complexity, it’s no surprise that the repetitive manual processes and late nights compressed into the financial-close window often top surveys of accountants’ biggest frustrations about their roles. At most enterprises, the financial close remains an intensely resource-intensive process, with dozens of parallel monthly closes occurring within subsidiaries and divisions. A failure in any one of them can delay the close at corporate, or worse, place the financials at risk.

The challenge has become more acute as organizations have increasingly become inherently global at every level, from looking to tap into high-growth emerging markets through acquisition or launching new lines of business. All are associated with a proliferation in legal entities, which in turn have their own global complexity.

Managing the entity-close process is about keeping track of each of the different things that need to happen during the close process. Many organizations manage this process with a checklist, typically in Excel. Each entity within an organization needs to close its books, and this involves many steps and often multiple people. Often, different parts of an organization will manage subsets of the close, by division or by geographical location, for example. As such, many Excel checklists are used to manage the process. As with most steps of the financial close process, such manual activities are error-prone and time-consuming. Managing the entity-close process can benefit from standardizing, centralizing, and automating.

Let’s walk through three steps of entity close management: plan, execute, and monitor.

Step one: Plan

Centralizing and standardizing are key to the planning step. Assess all the different checklists that exist in your organization and design templates for each closing process (monthly, quarterly, and annually). Cross-referencing each entity’s close process can help identify the best (and worst) practices. Templates may vary by entity type or regional differences. For example, they may handle local tax processes or a plant close for different types of manufacturing methods.

Process flows that include dependencies between programs and system jobs must be maintained – for example, in product costing, where the sequence begins with calculating work in process (WIP), then calculating variances, then a settlement run for posting the results to the appropriate accounts.

Step two: Execute

Once the plans have been made, it’s time to execute. Based on the templates created in the previous step, now create a task with absolute dates and start cracking. Automation is a key factor in this step. Evaluate what steps could possibly be automated. With such tools, you can schedule task execution and monitor the results to ensure that there were no issues running tasks. Additionally, you have the ability to send notifications via email once tasks are complete to streamline the execution of the next step. This makes it easy to track detailed status information on each task (who, what, when).

You can gain access to all system-created documentation (e.g., job logs, spool lists, application logs), and users can add additional external documentation to tasks. While you can manually track all these things in a spreadsheet, entity-close management tools can securely store all results with a comprehensive audit trail.

Step three: Monitor

By monitoring the entity close closely, you can identify issues, overdue tasks, and resource bottlenecks early in the close cycle before the overall close schedule is impacted. You can use notes and attachments to document any collaboration or the resolution of any issues that you encountered. For automated tasks, such as programs that ran, you can directly access system logs and spool lists without needing to search for them. Plus, the audit trail is useful for configuration and execution. You can easily analyze any kind of status change, how often a task was executed, or who added or changed notes and attachments.

Improving the close starts with the first step

The truth is that there is no silver bullet to transforming the financial close. It takes clearly identifying the shortcomings, applying opportunities to automate, improving collaboration that is grounded in well-developed workflows, and continuously measuring and improving. It’s the real confluence of people, process, and technology.

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Elizabeth Milne

About Elizabeth Milne

Elizabeth Milne has over 20 years of experience improving the software solutions for multinational, multi-billion dollar organizations. Her finance career began working at Walt Disney, then Warner Bros. in the areas of financial consolidation, budgeting, and financial reporting. She subsequently moved to the software industry and has held positions including implementation consultant and manager, account executive, presales consultant, solution management team at SAP, Business Objects, and Cartesis. She graduated with an Executive MBA from Northwestern University’s Kellogg Graduate School of Management. In 2014 she published her first book “Accelerated Financial Closing with SAP.” She currently manages the accounting and financial close portfolio for SAP Product Marketing. You can follow her on twitter @ElizabethEMilne